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What are two ways to refinance an underwater mortgage?

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Bankrate explains that one way to refinance an underwater mortgage is to use the federal Home Affordable Modification Program (HAMP), which is available through mortgage lenders, to simultaneously change the contract terms of your two mortgages and have banks lower your mortgages for a specific amount of time. Another way is to use the Home Affordable Refinance Program (HARP), which only helps mortgage owners who always pay on time.

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There are several requirements homeowners need to fulfill for eligibility in these two programs. To be eligible for the HAMP second lien modification program, homeowners need to provide proof that they are going through financial difficulties. According to MakingHomeAffordable.gov, these proven financial difficulties must prevent homeowners from paying their mortgage payments and potentially put them in default on their mortgages. HAMP is only for loans with Fannie Mae, Freddie Mac and other organizations signed up with the U.S. Treasury, according to Bankrate.

To be eligible for the HARP program, homeowners must be making on-time payments because a late payment within the past 6 months renders a homeowner ineligible. Zillow states that the first mortgage must be for 80 percent or more of your home’s value. Similar to HAMP, HARP is only for loans with Fannie Mae, Freddie Mac and other organizations that have arrangements with the U.S. Treasury.

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